Trustees: Trust Us, Medicare Is Healthy

ObamaCare extends Medicare's trust fund by 12 years to 2029, administration officials said Thursday in the annual report on Social Security and Medicare, ignoring that the extra savings and taxes are already earmarked for the new health law's major expansion of insurance coverage.

Those savings assume much slower growth in health care costs to an extent that Medicare's chief actuary says may be unlikely. Meanwhile, Social Security's cash-flow woes worsened and its disability trust fund will run dry by 2018.

"The report seems rosier, but really what has happened is a shift of resources away from Medicare toward Medicaid and the new health care subsidies," said Bob Bixby, executive director of the fiscal watchdog Concord Coalition.

'Great Uncertainty'

Still, the report does hold out the longer-term hope that ObamaCare might slow runaway health spending  if all of its provisions are enacted and work exactly as planned.

That is an assumption which carries "great uncertainty," cautioned chief Medicare actuary Richard Foster in an accompanying report.

Foster characterized the report as "an illustration of the very favorable financial outcomes" possible if higher medical productivity gains are achieved in the long run.

"Actual future costs for Medicare are likely to exceed those shown by the current-law projections," he wrote.

The trustees  all Obama administration officials  also noted that the cost projections factored in a 30% cut in fees paid to Medicare physicians, something the administration intends to avert.

The report on Social Security highlighted the impact of the weak economy and slower-than-anticipated recovery on payroll tax revenue. Program spending is expected to exceed tax receipts this year and next for the first time since 1983.

Narrow surpluses are seen from 2012 through 2014, but perpetual deficits should start in 2015, a year earlier than previously expected.

Officials focused on 2037, when the $2.6 trillion Social Security trust fund is projected to be spent.

But a more important date is 2018, when the Disability Insurance trust fund is expected to run out, two years earlier than Social Security's chief actuary projected in the 2009 report. Congress must take action by then to forestall a 12% cut by 2019.

Current law does not permit transfers between the program's Old Age and Survivors Insurance trust fund and its DI trust fund.

The trust funds reflect excess Social Security tax dollars that have long been spent on other government programs. So there are no real assets, just IOUs that authorize Social Security to pay benefits in excess of tax revenue.

ObamaCare extends Medicare's trust fund by 12 years to 2029, administration officials said Thursday in the annual report on Social Security and Medicare, ignoring that the extra savings and taxes are already earmarked for the new health law's major expansion of insurance coverage.

Those savings assume much slower growth in health care costs to an extent that Medicare's chief actuary says may be unlikely. Meanwhile, Social Security's cash-flow woes worsened and its disability trust fund will run dry by 2018.

"The report seems rosier, but really what has happened is a shift of resources away from Medicare toward Medicaid and the new health care subsidies," said Bob Bixby, executive director of the fiscal watchdog Concord Coalition.

'Great Uncertainty'

Still, the report does hold out the longer-term hope that ObamaCare might slow runaway health spending  if all of its provisions are enacted and work exactly as planned.

That is an assumption which carries "great uncertainty," cautioned chief Medicare actuary Richard Foster in an accompanying report.

Foster characterized the report as "an illustration of the very favorable financial outcomes" possible if higher medical productivity gains are achieved in the long run.

"Actual future costs for Medicare are likely to exceed those shown by the current-law projections," he wrote.

The trustees  all Obama administration officials  also noted that the cost projections factored in a 30% cut in fees paid to Medicare physicians, something the administration intends to avert.

The report on Social Security highlighted the impact of the weak economy and slower-than-anticipated recovery on payroll tax revenue. Program spending is expected to exceed tax receipts this year and next for the first time since 1983.

Narrow surpluses are seen from 2012 through 2014, but perpetual deficits should start in 2015, a year earlier than previously expected.

Officials focused on 2037, when the $2.6 trillion Social Security trust fund is projected to be spent.

But a more important date is 2018, when the Disability Insurance trust fund is expected to run out, two years earlier than Social Security's chief actuary projected in the 2009 report. Congress must take action by then to forestall a 12% cut by 2019.

Current law does not permit transfers between the program's Old Age and Survivors Insurance trust fund and its DI trust fund.

The trust funds reflect excess Social Security tax dollars that have long been spent on other government programs. So there are no real assets, just IOUs that authorize Social Security to pay benefits in excess of tax revenue.

Social Security's projected 75-year shortfall could be erased with an immediate payroll tax hike of 1.8 percentage points, down a whisker from last year. Making good on the trust fund would require an additional 0.8-percentage-point payroll tax hike.

The modest improvement stems from ObamaCare's tax on insurers' high-cost health plans. That should hold down the value of insurance policies. In theory, more compensation would go to taxable wages instead of tax-free health care.

Gov't Health Outlays Soar

The Congressional Budget Office provided a broader look at entitlement spending in its long-term budget outlook in June. That report found that under current law, which includes ObamaCare and the physician cuts, total spending on government health care programs would double from roughly 5% of GDP now to 10% by 2035.

Over the same period, Social Security outlays are projected to rise from 5% of GDP to 6%.

CBO said ObamaCare, as written, would cut Medicare spending by 2% of GDP by 2035. The law's provisions would also hike federal spending on other health programs by 1% of GDP.

Select market data is provided by Interactive Data Corp. Real Time Services. Price and Volume data is delayed 20 minutes unless otherwise noted, is believed accurate but is not warranted or guaranteed by Interactive Data Corp. Real Time Services and is subject to Interactive Data Corp. Real Time Services terms. All times are Eastern United States. *Reflects real-time index prices.